The Trustees warned that Medicare will go bankrupt by 2026, and Social Security by 2034. Even that understates the problem. Over the next 30 years, Social Security and Medicare are projected to run a staggering $82 trillion budget deficit. At the end of that period, these two programs would run a yearly deficit exceeding 10 percent of GDP. Simply stabilizing the national debt would require a 34 percent value-added tax (VAT), which is essentially a national sales tax.
And yet Congress and the President remain mostly silent on the greatest economic challenge of our era. Lawmakers seek “easy solutions” like economic growth, defense cuts, or millionaire taxes – none of which would come close to closing this shortfall. This paralysis may condemn the U.S. to a calamitous debt crisis sooner than many want to believe.
Related material:
- The Entitlement Crisis Ignored (National Review, March 2018)
- Yes, Entitlements Are Driving the Long-Term Debt (Economics21, April 2018)
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Brian M. Riedl is a senior fellow at the Manhattan Institute. Previously, he worked for six years as chief economist to Senator Rob Portman (R-OH) and as staff director of the Senate Finance Subcommittee on Fiscal Responsibility and Economic Growth. Follow him on Twitter here.